Rising healthcare prices have long been an issue for this country. This is largely due to both the third-party payer problem and a lack of price transparency. The lack of stated prices from providers makes it impossible for consumers to get the best price for any procedure. They can’t even know what they owe until after the procedure is over. No other industry is able to operate in this way.
Insurance used to only be purchased for catastrophic instances such as cancer, heart attacks, and life-threatening surgery – true “disaster” insurance. Now consumers purchase insurance to cover things as inconsequential as an office visit for the common cold. Instead of paying directly out of pocket for healthcare services, most patients are covered by either insurance or government programs. This creates a disconnect between the consumer and the producer. Since the consumer is not paying the full cost, they are more likely to agree to unnecessary tests and procedures. And since the producer does not have to disclose the full cost to the consumer, they are free to charge whatever they wish.
Without price transparency, healthcare services are not a true market. The airline industry used to operate in a similar way; the government heavily regulated prices and routes, and instead of contracting directly with airlines to book a flight, travelers would have to use travel agents who could set prices where they pleased. However, with deregulation and new technology in the ’80s and ’90s, airlines began to set their own routes and consumers began purchasing tickets directly from airlines. This gave rise to websites like Travelocity, Priceline, Kayak and many others, which could collect ticket prices into one easy-to-search place for consumers. Imagine if healthcare followed a similar path: consumers could simply type in the services they need and get an immediate list of the healthcare providers that provide that service as well as their prices.
Going into effect this year is a Centers for Medicare & Medicaid Services (CMS) administrative rule devised under the Trump administration. The rule requires hospitals to publish a machine-readable file that contains standard charges for all services at the hospital, including gross charges, discounted cash prices, payer-specific negotiated charges, and de-identified minimum and maximum negotiated charges. Hospitals can also choose to publish a consumer-friendly display of at least 300 shoppable services that can be scheduled in advance, including plain-language descriptions in a searchable format. This section must also provide gross and discounted cash prices, payer specific charges, and de-identified minimum and maximum negotiated charges.
While the new rule is a great win for price transparency, it is not without its issues. An analysis found that 30% of hospitals were non-compliant with the rule. The reasons for non-compliance ranged from a lack of resources to waiting to see what their competitors do. The analysis also found inconsistency in how the hospitals are setting up their machine-readable file. This makes it harder for the average consumer to search through the information, since the way the information is organized varies from hospital to hospital. While the rule survived legal challenges, it is possible it might not survive a new administration.
To prepare for a potential undoing of the CMS rule, the Oklahoma Legislature should pass its own price transparency laws. House Bill 1006 would require healthcare providers and facilities to make the prices for their most common health care services available to the public, either electronically or via their website. Health care facilities are also required to make common diagnosis and outpatient Current Procedural Terminology (CPT) codes public. The document must be updated annually (at a minimum). This bill takes a couple of steps the CMS rule does not. It requires healthcare providers to publish a list of CPT codes and provide a schedule for updating. This guarantees price transparency for Oklahomans even if a future administration inexplicably decides that healthcare prices should be kept secret from patients.
Another policy that Oklahoma should pursue is not allowing hospitals to report medical debt greater than the best local pricing to credit collectors if the patient has not first reviewed and agreed to the prices before services were rendered. This would protect patients from hospitals that are increasingly eager to collect on unpaid bills through lawsuits. This would likely be even more effective than simply requiring hospitals to publish price information since instead of a relatively small fee for non-compliance it would restrict their ability to collect for services rendered unless the price was stated beforehand.
Consumers have access to price information in all other transactions. With this information, they make the best decision for themselves regarding thousands of different products and services. There is no reason healthcare should be any different. With innovative price transparency laws, Oklahoma could become a leader in healthcare, with people coming from out of state to get cheap, effective healthcare.
The opinions expressed in this blog are those of the author, and do not necessarily reflect the official position of 1889 Institute.